Reviewing the Retail Real Estate Landscape…as Grade A Mall truggle With Vacancy Rates…
It has not been a great year for Grade A shopping Malls. In September, several media outlets carried reports that institutional investor, Novare was selling its malls in Lagos and Abuja. In a published rejoinder, the company clarified the position. “Novare Real Estate Nigeria Limited (NREN) wishes to clarify the recent news/media publications listing four of its Grade A retail properties for sale in Lagos and Abuja.” It said that “Novare raised two Real Estate Funds for the development of retail malls in Nigeria and across other African countries.
Following the expiration of the investment tenure, a minority of the investors in the initial Fund now seek to offer their interest in the retail properties to new investors, hence the advert placements on the media outlets. We therefore wish to clarify that Novare as an investment solutions provider remains confident in the Nigerian real estate market and is not exiting the market. We also wish to state that majority of the investors in the Funds are likewise confident in the Nigerian real estate market and are not offering their interest in the properties for sale.”
The reasons for the market’s belief in the rumours was because of the high vacancy rates in the Grade A malls. These worries were heighted when last week, news broke that Retail Supermarkets Nigeria Plc, owners and managers of Shoprite stores in Nigeria, were closing down their store in Ado Bayero Mall, Kano, Kano State. According to a letter issued by Hubertus Rick, Chief Executive Officer of Retail Supermarkets, the decision was reached after “after thorough evaluation of the store’s financial situation and the current business Climate.”
So what is the future of retail and how will the Grade A malls fare? In their seminal report, The Real Estate Market Review H1 2023, Northcourt*had reviewed the retail market and excerpts are published below:
Local retail developers in Nigeria’s core cities are cautiously expanding as they attempt a response to the growing demand for formal retail assets that offer an inviting environment while also catering to leisure and entertainment needs. The preference for smaller neighbourhood malls is evident among buyers, prompting developers to aggressively meet this demand in various nodes across the city.
Leisure features are increasingly prominent, while heightened advertising and retailer- customer engagement are the go-to strategies for customer retention. BrandCo, in partnership with Adidas, launched the Adidas Lagos flagship store in Victoria – a return to form from the 1990s. The new retail outlet is it’s 4th. The completion of Ikeja Town Square retail development saw the entry of pharmacy chain – MedPlus, while another retail mall, Ilé Ojà Òpébí, was completed in Q2 2023. FMDQ Securities Exchange Limited approved Hartleys Supermarkets and Stores Limited’s N5bn commercial paper. Purple Real Estate Income Plc (PREIP), the operator and developer of Purple Maryland and Purple Lekki malls, reported occupancy rates of 96% by the end of 2022. Generally, occupancy rates remain high in most neighbourhood malls, with average take-up rates remaining fairly stable. Grade A malls such as Apapa Mall and Adeniran Ogunsanya Mall continue to grapple with high vacancy rates.
As the retail landscape in Lagos changes, local players are adapting to meet the evolving needs and preferences of consumers with due consideration for the macroeconomic conditions. While challenges persist in attracting institutional capital and optimizing rental income, innovative strategies and new partnerships are emerging, paving the way for a dynamic retail real estate market.
In 2022 Nigerian cinemas generated an estimated N6.94bn in revenues per the Cinema Exhibitors Association of Nigeria (CEAN). This is up from N4.74bn in 2021, N2.1bn in 2020, N6.4bn in 2019, and N5.98bn in 2018. Increased ticket prices and Hollywood’s continued emphasis on African material have driven growth. The increased revenue generated by CEAN may likely contribute to the increased demand for commercial properties such as shopping malls and retail centres in areas where cinemas are located. This is because as more people visit cinemas, they will be more likely to visit adjacent commercial properties to socialise.
The Nigerian retail market has been undergoing a shift towards neighbourhood malls in major cities, driven by consumers’ demand for localised buying experiences. As a result of their low vacancy rates and high footfall, these retail destinations have become an attractive option for new market entrants. To expand their presence in the Nigerian market, retailers may need to consider the local nuances of consumer behaviour and preferences and develop tenant mix strategies that meet the requirements and aspirations of the local populace. The increasing use of e-commerce and other digital channels has allowed retailers to reach consumers more effectively. Obtaining these benefits require a substantial investment in technology, data analytics and talent, all essential to the successful implementation of an agile supply chain and logistics system.
*Northcourt is a real estate investment solutions company that adopts a research-based approach to developing and managing property as well as providing real estate advisory services in West Africa
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